Aaron Renn on Mitch Daniels' Social Issues Truce

Very interesting article by Aaron Renn about the last 18 years of Republican governance in Indiana. Local and niche but useful if you live in Indiana and vote.

Revisiting Mitch Daniels’ “Truce” on Social Issues (substack.com)

I neither live in Indiana nor vote there, but it was a very interesting article. Much of what he says rings familiar in my faraway red state, not to mention the GWBush years.

FTA: “But the theories that have animated the GOP governance in the state for the last 17+ years are wrong. We tried them and they didn’t work.“

I think this is really key for Republicans moving forward. Republican economic policies have had some clear wins (like getting the middle class out from under onerous mid-20th century income tax rates under Reagan), but the middle class has been hollowed out in this country, and someone needs to fix that if we’re going to be a great country again. It turns out that the free market (such as it is constituted here in the 21st century) has no better use for ex-factory workers than opioids and serf-tier jobs at Walmart. That has to be fixed.

Where I differ with Renn, however, is regarding the solution. Attracting high-wage, college-degree-required jobs to your state is just another way to wind up with two Democrat senators. Live by PayPal and Intel, die by PayPal and Intel. Even Eli Lilly apparently doesn’t care enough about Indiana to invest there.

I think a state like Indiana needs some clever solutions to support a thriving blue collar economy. What does that look like? Well, it starts with solid marriage and family law. Affordable family formation. Law and order. Safe schools, probably a total re-think of the public school system. Laws to support small side businesses. Local manufacturing, local farm and para-farm jobs. I don’t have all the answers, but “get Facebook to open a dev shop here” isn’t going to cut it, especially with abortion laws (and could we dream of the USSC overturning Obergefell?) poised to make a major fracture in how large Leftist companies think about where they put their next office.

Ultimately the measures of success should look more like “families that live in their own homes on a single income” rather than “count of jobs that require a college degree.”

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If Indiana could break up Amazon, I’d support that.

In the meantime, do what I did and stop buying from them.

If Indiana has substantially underperformed relative to establishment Republican economic talking points, than California has substantially overperformed relative to establishment Republican economic talking points (but substantially underperformed relative to establishment Democrat social welfare talking points). It goes to show how current policies of both parties are bankrupt.

I live in a major metro area in California (but not LA or Bay Area), and quite a few families from my church and homeschool circles have been leaving the state, and the rate is only increasing. Is it because we have two Democrat senators and the rest of the liberal/progressive craziness? Nope. It’s because the cost of housing has been skyrocketing out of reach of the middle class, let alone the working class. The problem with high wage jobs generated by PayPal and Intel is that when no new housing is built, those high wages bring new people to the state who displace ordinary Californians.

Neither the Democrats nor Republicans have an answer to the housing crisis. Progressives want to believe that there is some way to generate affordable housing without actually building housing. And the typical conservative thinks that it is socialist tyranny and infringement on his freedom for the state government to limit his power (via zoning) to control what his neighbor does with his property.

The reality is that for the past twenty years, economic growth has been limited to only a few metro areas of the U.S., of which Indiana has none. Until we get economic growth more broadly distributed, these problems will not be going away.

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Let me give an example for my last point. The going wage for a fast food job in my neighborhood has been $16.50 per hour, according to the sign in the window. But they haven’t been getting enough takers, so it has now been bumped up to $18 per hour. Maybe that’s a good wage for entry level unskilled work by Indiana standards, but don’t move here, unless you plan on living in your car, which many people do.

It’s not worth moving to those areas of the U.S. that have experienced economic growth because the higher wages are eaten up by a much higher cost of living. It’s also not worth moving to areas of the U.S. with a low cost of living because the wages are much lower.

Wow. $18/hr is still considered decent for entry level work where I live (Southern Indiana/Louisville, KY).

Have you followed it closely in the last year? Entry-level fast food jobs around here went from $13/hr last summer to $15/hr this summer.

Both parties cooperated to bring us to our current state. The broad bipartisan consensus in favor of “free trade” in particular was a key piece of this. Both Germany and Japan are first-world countries with robust manufacturing sectors. Where is the law of nature that all our factories had to be boxed up and shipped to China?

You correctly identify housing costs as one of the major obstacles to affordable family formation. California has some unique dysfunctions related to Sierra Club-type interests shutting down development, along with unchecked immigration resulting in favela-style settlements.

But even my own Sun Belt city is running out of room for the suburban subdivisions that are so popular here. Where I live in the near-suburbs was basically a housing development construction project for a few decades. Now the development has basically ended here in the near suburbs, and what development can be sustained by the supply chain crisis is happening in the exurbs, a good 40 minutes from the city core without traffic.

And the Sierra Club isn’t wrong about having wild spaces: A gigantic suburb from the Pacific coast to El Paso isn’t a healthy way to live.

Perhaps we should consider closing the southern border instead of allowing every Latin American, Haitian or Miscellaneous to wander across and take up residence here. That would go a long way to decreasing housing costs in the long run. This probably hasn’t hit Indiana very hard (has it?) but it’s certainly a major factor locally for Joel and me.

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I agree, but reservation of some areas for wild spaces requires allowing increased density elsewhere. It’s the latter that is not happening in California. Most of the Bay Area and other cities in California are still zoned for only single family homes, thus thwarting an increase in density that would otherwise naturally occur. And it’s just not Sierra Club types – there are a remarkably large number of libertarian Republicans who fervently believe in the free market and deregulation when it comes to corporations but not when it comes to local zoning. They hold the view that the working man has no right to stop his job from being shipped to China or being replaced by a cheaper immigrant but they have every right to prevent a duplex from being built down the street because it might lower their quality of life or the value of their property.

If tent cities and RVs parked on the street count as favela-style, we’re getting a lot of that, although I think they are largely not inhabited by immigrants. When it comes to actual buildings, rapid gentrification is occurring. My neighborhood largely consists of 1200 sq. ft. houses built for the working class 65 years ago, and a house on my block just sold for $1.2 million. My guess is that it looked like (and maybe was) a bargain for someone coming from the Bay Area with a Bay Area salary.

I think low-skill immigration was a big factor in California twenty years ago, but I don’t think it is as large a factor now. Part of that is probably due to a decline in low-skill immigration in recent years, but a bigger factor is probably that California favela-style housing is now too expensive for immigrants unless they resort to tents. The departure of low-skill immigrants to other states is probably the main reason why fast food now has to offer $18 per hour.

Concerning housing, this video is helpful.

Nobody likes it when his ox gets gored.

Yes, that’s what I am talking about. I visited San Jose for work regularly back in 2018-2019, and the tent cities were shocking. We would come around a corner and a tent city would sprawl out in front of us. It was like the Grapes of Wrath. I didn’t familiarize myself with the ethnic origins of the occupants, but my general impression matches your statement. My impression was that immigrants were more likely to live 15 to a house or not in the Bay Area at all.

I’ve seen much less of that in San Diego, but maybe I just haven’t been in the right places. San Diego in general strikes me as a pretty well-run city, especially by California standards. I also haven’t been to San Diego since 2019.

I had a very strange experience at a restaurant in San Jose around that same time. My consulting company sponsored a party for our client. We met at a restaurant, obviously a bougie place with craft beers and such. But it was mostly self-service: order beer at the counter, and signs up asking tech workers to bus their own tables! This was back in 2018, also.

The squeeze of the middle class was very obvious to me just in discussions with client staffers who worked at the HQ and lived in the area. The area was clearly run for the cream of the tech crowd (maybe $250k or $300k+ salary) and for the drug addicts in the tent cities, and everyone in between, from the Denny’s waitresses to the lower-end tech workers could pound sand.

Yes, San Diego is better run than LA and the Bay Area, but things are going downhill. There are a lot more homeless people wandering around, although the police have not allowed them to set up encampments in my neighborhood (downtown is a different story). Besides that, general quality of life is declining as potholes are not fixed and parks and playgrounds are not kept up. But despite all the problems, California in general and the Bay Area in particular have more economic growth than Indiana and other red states.

The hollowing-out of American manufacturing has been under way for a generation, as indeed it has in Europe as well. Even in China, some of its low-wage/low-skill manufacturing jobs are now being shipped … to Vietnam.

Seen over the very-long-term (sixty years), I saw somewhere some stats on real wages. They showed, if I can recall them correctly, that while average wages had grown until about the mid-90s and then stagnated, wages for the top quintile of the income distribution had grown about 70 percent in real terms in this period; wages for the bottom quintile had grown no more than 20 percent or so.

On top of that, American cities were facing a classic case of large real increases in housing prices because of demand outstripping supply. These issues aren’t restricted to the USA, by any means. It’s a classic example of what is sometimes called a “wicked” problem; that is, where there are far too many ‘unknown unknowns’.

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Here’s an interesting article I just stumbled on about California.

(The title finishes “… California Is In Question”)

Interesting to go back and forth between talking about Indiana vs California. I think maybe Aaron Renn is looking at the wrong goals. It’s easier to get a middle-class lifestyle (which can’t be determined just by income, given drastic differences in cost of living) in the midwest than on the coasts, I think. So are the coasts winning? I don’t think so. And Indiana pays for private school now, and Ohio, where I live, is, Lord willing, about to do an even better job of that. Those sorts of things make a much better barometer for whether a state is doing well economically than most obvious metrics. (Though there are a few metrics quoted in the above article about CA.)

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What is interesting about Renn’s article is that he addresses the question, “If conservative Republicans get control of a state and have the power to enact their ideology, does life improve for the common man?” The answer is, “No”, as demonstrated by Indiana (and even more so, Kansas). A corresponding question might be asked, “If progressive Democrats get control of a state and have the power to enact their ideology, does life improve for the common man?” Again, the answer is, “No”, as demonstrated by California. Some thoughtful progressives on the national level have noticed the latter and expressed concern that California is not providing a good example for their cause.

Also, it is important to not underestimate the immense size of California and the enormous diversity within the state – there is far more here than Hollywood and San Francisco. And the average voter is more conservative than the average politician. Back in 2008, the voters amended the state constitution over the will of the political class to ban same-sex marriage (this was struck down by the 9th Circuit), and more recently in 2020, the voters declined to remove the prohibition of affirmative action from the state constitution, again over the will of the political class.

My point is that Renn is missing some obvious ways that this question can be answered in the affirmative about Indiana.

They implemented a decent plan to improve life for the common man in terms of education, by giving him much more power to control the quality and type of education that his children get, affordably. They made a major source of funds that are supposed to be used for the common man’s benefit actually able to benefit many more people.

Edit: But overall, I agree with Renn’s article.

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San Diego is beautiful and the most unaffordable city in the nation.

Every few years we get hit with another proposition for a major tax for education or roads. “Think of the kids!”

Yeah but Florida has half the tax burden, the best school system in the nation, and pristine roads though it rains every day. CA grift is real and obvious. Was never able to complete that SF → LA train.

There was a recent CA proposal to double the income tax for a UBI system. What a joke.
Colleagues at work tried to convince me “but CA is the 5th largest economy!” and that argument used to hold more sway that it does now.

CA for the first time in its history just lost population. Tons of people are leaving. The Bay Area is weakening compared to Austin and Miami. Over time Stanford / UCLA / UCSD will lose their sheen as well.

The numbers don’t look good. CA has a good bit to coast on but the direction is clear.

Tell me about it. They are apparently all moving to my town. We have new next-door neighbors who moved in last August. I expect that they are getting close to a million dollars into a 3 bed/2 bath house that had sold to the prior owners in 2018 for under $400k.

California has been a failing state for as long as I’ve been alive and hasn’t gone to the trouble of actually failing. Though it came pretty close in ‘09 or ‘10 when it was cutting IOUs for tax refunds. California is kind of a case in point that there is a lot of ruin in a nation.

I think at the end of it, while Indiana has raced to the bottom, California has squeezed the middle class out. California is a much nicer place to be a millionaire or to be on the dole than Indiana.

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Lived a short time in La Mesa (SD) and Huntington Beach (LA), and have since then described CA to people this way. In his Zen and the Art…, Pirsig describes riding with his son one day, and noticing everyone had just gotten obnoxious. He couldn’t figure it out until he realized they’d crossed the border into CA. Then he said California is what happens when you tip North America up on end. Everything without roots slides out to southern California. I thought it perfect. Love,

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I think this supports Renn’s point. If red state Republican politicians are so smart about producing economic growth and good jobs, how come they can’t beat out a state with unprosecuted petty crime, tent cities, and excrement on the sidewalk? People are leaving California not because it is has become a failure like Detroit but because it has, in a sense, become too successful by paying high salaries to incoming tech workers who bid up housing. Fundamentally, I think we must conclude that conventional Republican wisdom that low taxes and “business-friendly” policies will bring economic growth and good jobs to a state simply isn’t true. It would be better to focus on policies that improve the life of the common man rather than to continue to push zombie Reaganism.

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Pristine weather can make bad economics go longer than they should.

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